S&P rates Parkland Fuel notes BB-

S&P said it assigned its BB- issue-level rating and 4 recovery rating to Parkland Fuel Corp.'s C$300 million 5¾% senior unsecured notes due 2024.

The 4 recovery rating reflects an expectation for average (30%-50%; high end of range) recovery in the event of default.

The new debt will be held in escrow until Parkland completes the acquisition of its portion of CST Brands Inc.'s Canadian assets, likely in late 2016 or early 2017.

Parkland’s BB- long-term corporate credit rating and stable outlook are unchanged along with the BB- issue-level rating and 3 recovery rating on its unsecured debt outstanding. That said, S&P said it will likely lower the recovery ratings on Parkland's existing unsecured debt to 4 from 3 if the company finances the acquisition as proposed, because the agency believes the addition of more than C$500 million of secured debt from a new C$700 million revolving credit facility would weaken noteholders' prospects for recovery in the event of default.

The transaction funding is proceeding in line with S&P’s expectations, with the company having completed a bought deal for C$230 million of equity, along with these new notes and a new, fully underwritten secured credit facility.

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